Moderator:

• Katelyn Gallagher, Campaign Director, Bank Information Center

Panelists:

• Jon Sward, Environment Project Manager, Bretton Woods Project
• Ellenor Joyce Bartolome, Senior Executive Officer for Policy, Campaigns and Communications, Philippine Movement for Climate Justice
• Hussain Jarwar, CEO, Indus Consortium
• Christine M. Richaud, OPCS Country Economics, World Bank

Katelyn: The Bank’s environmental and social framework (ESF) does not currently apply to DPFs. Encourage the Bank to adopt a more ambitious approach to using the ESF, exploring how it can broadly align DPFs with ESF principles.

Civil society is calling for enhanced transparency, mandatory stakeholder consultations, and strengthened accountability mechanisms.

Bank management is increasingly emphasising radical transparency and a commitment to improving as an institution – this could be a pivotal moment to take action.

Christine: The ESF applies to IPF, not to DPFs, due to the differences in these instruments. DPFs focus on supporting policy and institutional reforms that are cross-cutting and economy-wide, such as laws, regulations, and institutional changes with broad impacts. Unlike IPF, DPF funds provide non-earmarked budget support.

Consultations and policy impact analysis: We provide guidance to staff on conducting impact analyses and encourage governments to engage relevant stakeholders, aligning with each country’s specific policy processes. We avoid imposing institutional requirements, instead following country-level frameworks. Our policy framework mandates that outcomes be documented in programme documents, which we take seriously. Our impact analyses, based on robust data, are made publicly available.

Katelyn: Not enough to let governments see what they think is best – quality of consultations is not up to the best standard.

Hussain: As grassroots communities, our engagement with the WB on DPFs has varied; sometimes the Bank consults us, but outcomes have been mixed – sometimes positive, sometimes negative.

A key example is the 2020 critical power sector reform programme in Pakistan, aimed at reducing power generation costs and better targeting subsidies, which closed in 2022. Throughout, we submitted recommendations to the WB country offices, but the consultation process had significant issues. From our perspective, it was neither genuine nor well-organised, and it lacked a focus on achieving meaningful outcomes.

Engagement was often transitional and selective. During the CCDR programme, despite providing detailed comments, communities were ultimately disregarded in the process. Timeframes for providing feedback were too short, and documents were only available in English, making it difficult for communities to respond effectively. Summaries should be available in local languages to support community participation.

We raised these concerns with WB country teams, but this issue is not limited to specific offices – it’s a systemic problem with DPF governance. For instance, policy reforms promoting hydroelectric transmission lines will have significant social and environmental impacts, yet affected communities were not consulted. Communities on the ground must be engaged in these processes.

Ellenor: Stakeholder consultation should be mandatory. While the Bank advocates for stakeholder engagement, this approach distances it from the real impacts of DPF reforms, placing the burden solely on borrowing countries. Safeguards must not be limited.

Is this what “country ownership” in DPFs means? Harms remain unaddressed. For instance, in the Philippines, the DPF facilitated 100% foreign ownership and removed the 40% equity cap in the renewable energy sector – contrary to constitutional protections and against community interests.

Stronger language is needed. DPFs assume that borrowing governments engage stakeholders adequately, but how can the Bank ensure this? DPF language must compel national governments to consult meaningfully. Currently, consultation outcomes are not publicly available, and we see little evidence of these processes. Private sector stakeholders, poised to profit, are often the primary beneficiaries. We need transparency on fund allocation – no more financing fossil fuels during a climate emergency. Risk ratings like “mid” lack justification – why is it mid?

Community members face barriers if they wish to file complaints with the Inspection Panel, which is open only for one year. This limited recourse is a red flag. Another DPF is already in the pipeline with no consultation.

Katelyn: In some cases, there are good examples, but the approach feels ad-hoc. Without a clear requirement, there isn’t a consistent standard. As a result, we’re unlikely to see strong consultation across the board.

Could the Bank develop a stakeholder engagement plan specifically for DPFs?

Christine: We appreciate the opportunity to learn, so thank you for sharing. While I’m not familiar with these specific case studies, I understand these issues are systemic. We agree that stakeholder consultations should be done well and involve all stakeholders. Our teams are expected to carry this out effectively. In the case of Pakistan, the country office made efforts, though there’s always room for improvement.

The standards we apply are very high; this is not something we take lightly. Opportunities for consultation on some DPF reforms occur at various stages, such as during policy dialogue. Country Partnership Frameworks (CPFs) will also facilitate deep and well-organised consultations with all stakeholders. Since DPFs involve wide-ranging reforms, this is when those priorities should be discussed. The scope of DPF engagement is broader and often takes place outside of direct country dialogues, encompassing a range of consultations across countries. We recognise there’s room for improvement and want to engage more frequently and deeply on the findings and analysis we carry out. DPFs are part of a broader engagement strategy.

Regarding consultation quality, we’re focused on the language used and the time provided for commenting on documents. We want to ensure there’s sufficient time for CSOs to provide their input. If there are improvements to be made in this regard, we welcome that feedback, especially as we work on the Scorecard and the operational efficiency dashboard, including an indicator on citizen engagement quality. This is still a work in progress. If improvements to our guidance for teams are necessary, we’re committed to making those changes. Since 2003, DPF guidelines on assessing the impact of policy reforms have been significantly strengthened, and we now have more tools to carry out these assessments.

Katelyn: Thinking about the impact of DPFs and how the Bank can be more transparent, especially regarding climate impacts – what are the positive climate impacts through these DPFs?

Could you elaborate on how those impacts are measured in the Scorecard? Additionally, will the citizen engagement indicator include DPFs, and will it apply to all Bank finance?

Christine: Yes, that is our goal, but it is still a work in progress. I think it will be very helpful.

On climate impact: the money goes to the government budget, and if there are issues with the government budget, there are broader problems. This is somewhat a separate topic in terms of the Bank’s role.

Since July 1st, all operations are Paris-aligned. We will not finance operations that support fossil fuels. We have a specific instrument method for DPFs, as well as for IPFs and PforRs.

There are two angles to the response: 1) We are looking at the climate impact in terms of the dollar amount—measuring climate co-benefits to reflect the increasing focus on climate mitigation and adaptation measures. These are important to address climate change, but 2) we also need to think about the outcomes, not just the dollar amount. Many operations contribute to meaningful outcomes.

Jon: Regarding energy-related prior actions, we are looking at all energy-related prior actions because DPF financing is now essential to the Bank’s energy lending. Prior actions either actively contribute to policy actions or have significant greenhouse gas (GHG) impacts, but there is a risk of locking in carbon. This information is not made available to us – we do not see alternatives in areas where such assessments do exist.

While these are country-owned reforms, they are still very much aligned with a 1990s policy paradigm. The policy advice remains the same, but with climate change forming an increasingly important rationale. Is this tool still fit for purpose, or does it need to be revisited? A just transition must be a community-wide project for it to be durable. This uneven approach needs to be reconsidered, as it is missing a link with the broader development agenda.

Ellenor: Gas expansion projects are taking place in the Philippines, particularly in the electricity sector. Electric operators are now being subject to public-private partnerships (PPPs) and are increasingly owned by the biggest energy operators in the Philippines. These projects allow countries to use lower-carbon technologies, but they ultimately revert back to gas.

Gas is often considered a transition fuel, but this presents another loophole. It can still be considered Paris-aligned. Two points need to be addressed: 1) fossil fuels should be included in the exclusion list of financing instruments, and 2) the last breath of coal can be unjustifiably justified as a transition.

One project, which is nearing completion for solar fishing, endangers communities. All of these efforts and techno-fixes are constrained and pose a barrier to the climate ambitions we have. We need a Paris Agreement that adheres strictly to the goals of the PA. These technologies lock countries into carbon dependency and debt. The conditionalities being pushed are leading to a private-sector-led transition, driven by private operators. DPFs cannot continue business-as-usual under these operations. Mechanisms must be in place to ensure transparency and accountability, to prevent the flow of investments into fossil fuels.

Hussain: The Country Partnership Framework (CPF) process started in 2024. We feel that before the consultation, key insights should be shared. The process needs to improve so that prior actions are provided earlier, allowing for a proper consultation process.

These reforms are not Paris-aligned. According to WBG’s own reports, there is a wind corridor with potential for 35,000 MW, and the possibility of generating 50,000 MW. However, current reforms are supporting mega hydropower projects, which undermine the Nationally Determined Contributions (NDCs). Our NDC targets a 30% share of renewable energy (RE) by 2030, yet in 2024, we are still at only 7% of RE. These reforms are undermining Pakistan’s potential.

Christine: How do these reforms link with the Climate Change and Development Report (CCDR)? The CCDR does not only address climate change issues; it also examines what a country can do to develop in a climate-friendly manner. A thorough analysis is conducted in CCDRs, which we use to inform the CPF. The findings of the CCDR underpin the CPF and guide our operations, especially when addressing climate-related initiatives. Energy transition is complex, slow, and not easy. If a prior action leads to carbon lock-in, we will not pursue it.

Regarding gas, in some countries, natural gas may be the only short-term option to provide energy for their populations. Sometimes, gas is the most viable resource available. It’s important not to outright reject gas usage, as it might make sense for a country that is still developing and needs to meet its energy needs. The burden should be shared, and there’s a sequencing issue at play.

As for hydropower projects, I don’t have specific expertise on Pakistan, but your point is valid about what a DPF can do versus an IPF. We wouldn’t fund a hydropower project under IPF, but we could use IPF to support such projects, ensuring robust safeguards.

The DPF can help set the stage for energy access and efficiency through policy reforms. There are numerous DPFs in the energy sector because many essential policy reforms need to take place.

When we talk about affordable energy, including tariff reforms, we also conduct social analysis. This is rigorously implemented to ensure that if policy adjustments are needed, they are made appropriately.

Jon: From the CSO perspective, what’s often missing is clear visibility on how the Bank defines carbon lock-in and how it makes that judgment. While there may be analysis on gas, it isn’t always clear in programme documents. How are staff making these assessments? It would be helpful to see a more transparent and explicit explanation of how carbon lock-in is defined and evaluated in relation to specific projects.

Regarding the CCDRs, while it’s a positive innovation for the Bank, the CSO consultation process within them is uneven, and it still largely goes through the country offices. This means that engagement with civil society is inconsistent, and in some cases, it could be improved to ensure more meaningful input.

On the corporate scorecard, specifically the energy access indicator, there’s a concern about DPF being counted, even though right now the data is only IPFs. If there are any insights on how DPF will be used more effectively in this context, that would be valuable.

When it comes to climate finance in DPOs, there’s an issue with DPFs not being linked to anything explicitly climate-related. What are the specific prior actions, and how can these be tagged to show their climate impact? More clarity is needed in justifying the accounting behind these actions and demonstrating the catalytic impact of climate action.

Lastly, the Global Challenge programme on energy transition is focused on maximising private finance, but this needs to be part of a broader and more holistic policy discussion. It shouldn’t be just about the most cost-effective way but should address a range of factors that contribute to a just and sustainable transition.

Christine: The Bank has the expertise to conduct the necessary analysis for carbon lock-in and other climate-related assessments. This analysis is part of the quality programme, and the assessments are published in the programme documents. The way the Bank uses the term “consultation” is designed to hear from stakeholders, but the process is different from how IPFs are done, indicating a more structured approach in some cases.

Regarding the scorecard indicators, more detailed information and clearer methodologies can be provided. DPFs are seen as contributing to the broader narrative of results, and the Bank is looking at ways to improve the clarity and transparency of these contributions.

On climate co-benefits methodology, the Bank’s approach ties the dollar amount directly to prior actions specific to climate-related impacts. While this system can be refined over time, it is already clearly linked to climate outcomes.

Finally, on the Global Challenge programme, the energy transition needs are enormous, and the Bank cannot finance the entire transition. Trillions of dollars are required, and the Bank’s role is to facilitate and mobilise as much funding as possible within these vast financial needs.

Questions and answers: 

Amy, Arab Watch Coalition: Citizen engagement: extend the corporate mandate to IPF – the scorecard now includes citizen engagement. Does this mean that OPCS is developing a guidance note for IPF? How will you guide staff?

Fran, Recourse: Paris alignment sector note for DPF – not unique to DPF, methodologies are not Paris-aligned – much further to go to rule out all support for fossil fuels. The role of public finance in supporting the energy transition is paramount, particularly LNG.

Fiza, Big Shift Global: The process has been ongoing for decades – CSOs and stakeholders have been raising concerns regarding consultations, etc. – engagement with country stakeholders. I want to know why the constraints on these processes are not improving at the ground level. Wouldn’t it be good to have country directors and country representatives on the panel?

Dustin, Urgewald: The 2017 change in the exclusion list also includes information on nuclear – moved from financial agreement to general conditions. Try to get a clear interpretation from the Bank. What are your experiences with that?

Claire, Oil Change International: Gas for energy access. WB gas finance – 90 percent goes directly to export.

Christine: 1st question on citizen engagement: More and more guidance is being provided to teams through instruments. We want to ensure that they are incorporated into policy processes and procedures. If there is a need to improve, then it will be addressed. Regarding the indicator, during the methodology, there will be an assessment as to whether these resources are in place to achieve a good score. If we think that some teams and instruments do not have the resources to perform well, we will address that.

Gas: There are pros and cons. Gas can help poor people, but the energy transition needs to happen.

Hussain: To close the panel, my last point is that we want WB to review structure of governance etc and exclude all fossil fuels.

Ellenor: DPF is new form of structural adjustment programmes – business as usual schemes need to be reviewed, and overhauled. WBG can stop all forms of fossil fuel financing – need to close loopholes.

Jon: Opacity of the instruments – energy specialists did not know DPF reforms were taking place in their own country. Low-hanging fruit: disclose prior actions well in advance of board date – for that to happen there needs to be leadership from management.

Katelyn: Does seem like there is openness in management of how these policies can be revisited. Happy to hear that openness and about the corporate scorecard opportunity – might push for all DPF operations to do stakeholder engagement in a meaningful way.